22nd Jun 2006 07:01
Crest Nicholson PLC22 June 2006 22nd June 2006 Interim Results Announcement Crest Nicholson PLC, the residential and mixed use development company, todayannounces interim results for the six months ended 30th April 2006. These are the first results reported under IFRS and with housing revenuerecognised on the basis of legal completion rather than on build completion. Theresults for the comparative period have been restated accordingly. Highlights: • Turnover up 1% to £355.1m (2005: £350.6m) • Open market housing completions up 2.5% to 1,062 units (2005: 1,036) • Affordable housing completions up 72% to 516 units (2005: 300) • Total completions for 2006 expected to be over 20% higher than in 2005 • Housing turnover up 6.8% to £296.2m (2005: £277.4m) • Housing forward sales of £354.0m • Over 85% of the unit sales required for the 2006 target have been secured • Strong underlying performance. The 2005 P&L and balance sheet comparatives have been affected by the restatement to IFRS and by changing our housing revenue recognition point to legal completion in line with our peer group. The comparatives do not reflect the underlying progress made in the first half: • Operating profit of £48.8m (2005: £58.7m) • Pre-tax profit of £39.2m (2005: £48.9m) • Earnings per share of 24.6p (2005: 30.5p) • Short term housing land bank increased to 16,252 plots (2005: 15,903) around 5 years supply • Development value of contracted short term housing and commercial land bank maintained at £3.5bn • Interim dividend increased 7.1% to 4.5p (2005: 4.2p) • A major new residential development in West Lothian has been secured since the period end for 2,000 units with outline planning permission and options on future phases already allocated for development which could total a further 3,000 units. Commenting today Stephen Stone, Chief Executive, said: "The Company has made good progress in the first half, having already securedover 85% of the unit sales required to meet our full-year target. Completionsare expected to be over 20% higher than in 2005. "We have confidence in our ability to design and produce environmentallyefficient homes at a competitive cost and to meet the challenge of increasingregulatory standards for sustainable development. Through the BusinessImprovement Initiative and design innovation we expect to deliver steadyimprovement in operating margin as the changes made feed through to future unitcompletions. "The steps we are taking to improve the business, combined with a steady marketand a quality land bank, give us confidence that Crest is set on a path ofimproving performance, which will deliver results in line with ourexpectations." Enquiries to:Crest Nicholson PLC Brunswick Group LLP Stephen Stone, Chief Executive Andrew Fenwick Peter Darby, Finance Director Robert Gardener Tel: 020 7404 5959 (on day of announcement) Tel: 020 7404 5959 Tel: 01932 847272 (thereafter) The analyst presentation will be available on the Company's web sitewww.crestnicholson.com from 9.30am Chief Executive's Statement RESULTS AND DIVIDEND I am delighted with the performance of the business in my first six months asCEO and with the significant progress we are making to improve the business forthe future. Profit before tax and dividend was £39.2m (2005: £48.9m). Our 2005 profit andloss and balance sheet comparatives have been affected by the restatement toIFRS and the change of housing revenue recognition from build completion tolegal completion, in line with our peer group. One consequence of this is thatthe 2005 half year comparative figures are enhanced through the inclusion ofhigh margin sales previously recorded in 2004. This adverse impact reverses inthe second half of the current year, and we expect the full year result to be inline with our expectations. The Directors are confident in the future of the business and are pleased todeclare a 7% increase in the interim dividend to 4.5p (2005: 4.2p) to be paid on1st September 2006 to shareholders on the register at the close of business on4th August 2006. REVIEW OF OPERATIONS HousingThe housing market in the first half of 2006 has been stronger than in thecomparative period. While visitor levels are slightly lower than in 2005, netreservations are higher as purchaser confidence has improved. We have nowsecured over 85% of the unit sales required to meet our 2006 target. For the half year, we are pleased to report a 2.5% increase in open marketcompletions to 1,062 units (2005: 1,036) and a 72% increase in affordablehousing completions to 516 units (2005: 300). For the full year, we are expecting circa 2,000 open market completions and alittle over the 900 affordable completions previously anticipated. Totalcompletions are expected to be over 20% higher than the restated total for 2005(2,417 excluding joint ventures). For 2007, we remain on track to deliver a 15% increase in open marketcompletions as more of our regeneration projects come on stream. As expected, the average sale price for the half year reduced to £188k (2005:£208k) due to the increased volume of affordable housing. The average salesprice in the second half is expected to be higher leaving the average for thefull year a little under £200k (2005: £225k). Our housing forward sales position at the half year was £354.0m. Land SalesLand sales continue to be an integral part of Crest's method of operation as ourstrength in land buying, design and planning enables us to secure more land thanwe need for our production requirements. Land sales in the first half were £36.0m (2005: £28.3m). Full year land salesare expected to be slightly lower than the £62.7m recorded in 2005. Mixed-Use CommercialCommercial sales from our mixed-use schemes in the first half year were £22.9m(2005: £44.9m) and sales for the full year are now expected to be around onethird lower than the £92.3m recorded in 2005, principally because of planningdelays to the Camberley project. MarginIn the first half of 2006, the operating margin was 13.7% and we expect toimprove on this in the second half. Given stable housing market conditions, wewould expect to see steady improvement in the operating margin percentageresulting from the steps being taken to improve the business. The Business Improvement Initiative is on track to achieve cost savings of £10mper annum by the end of the 2008 year through a combination of lower product andoverhead costs. While some of these savings will be used to accelerate landbuying, the majority will be reflected in improved operating margins,particularly in 2008, when current pre-operational sites begin to contributefully to unit completions. Land BanksThe short term housing land bank has increased to 16,252 plots (2005: 15,903plots) with a gross development value of £3.0bn (2005: £3.0bn). At the currentlevel of turnover this land bank represents about 5 years' supply. The strategic housing land bank amounts to 11,783 plots (2005: 12,022). Lastyear we reported that we expected to convert 3,000 units from the strategichousing land bank to the short term land bank by the end of 2008 and we are ontrack to achieve this. In 2005, we converted 495 plots. After a relatively lownumber of conversions in 2006, we now expect to convert around 2,000 units in2007 as we have already submitted planning applications for our strategic landholdings at Hunts Grove, Gloucester and an extension to our strategic site atStowmarket. The current commercial land bank amounts to 1.7m sq ft (2005: 1.7m sq ft) with adevelopment value of £501m (2005: £494m). Our pipeline of regeneration projects is a key component of our future growthand it was particularly pleasing to contract our major regeneration project atOakgrove, Milton Keynes and add it to the short term housing land bank. We werealso delighted that the regeneration pipeline was supplemented by our selectionas lead developer for the £250m regeneration project at Woolston Riverside inSouthampton. Our reputation for creating well conceived high quality communities has enabledus to secure, since the half year end, a major development project at Heartlandsin West Lothian, Scotland. The first phase of the development consists of 2,000dwellings with outline planning permission and we have secured options on futurephases, already allocated for development, which could contribute a further3,000 dwellings. Since the half year end we have also contracted the Penarth regeneration projectwhich moves approximately 400 units into the short term housing land bank. Design InnovationCrest's reputation for design innovation is well established. Our recent successin the ODPM Design for Manufacture competition with the "SixtyK" submissiondemonstrated our ability to produce groundbreaking designs to increasinglydemanding standards. This success has led to securing sites at Newport Pagnell and Maidstone whichtotal 216 plots. Later this year, the "Code for Sustainable Homes" is due to be launched whichintroduces new planning and environmental standards. The Code brings freshchallenges to the housing industry and is highly likely to influence future landsupply particularly from the public sector. Good design, increasingenvironmental standards and modern methods of construction are all essentialingredients in working partnerships with local and central government. The key to Crest's land buying success is its ability to achieve planningconsents through superior design and to create cost efficient, sustainablesolutions which meet the aspirations of landowners, particularly in the publicsector. Financial PositionShareholders' funds have increased by £33.7m or 13.4% to £285.6m. The net assetsattributable to ordinary shares have increased to 254p per share compared with225p per share at 30th April 2005, an increase of 13%. Net borrowings of £194.5m represented gearing of 68% of shareholders' funds(2005: 93%). Preference share capital of £38m, reclassified as debt under IFRS,was repaid on 2nd November 2005. PROSPECTS The current housing market is steady - reservation rates are better than in thecomparative period and we are seeing sufficient house price growth to offsetbuild cost inflation. In our view, the fundamentals of the housing market remain sound - supplycontinues to be constrained and demand is supported by good employment levelsand low interest rates. We have confidence in our ability to design and produce environmentallyefficient homes at a competitive cost and to meet the challenge of increasingregulatory standards for sustainable development. Through the BusinessImprovement Initiative and design innovation we expect to deliver steadyimprovement in operating margin as the changes made feed through to future unitcompletions. The steps we are taking to improve the business, combined with a steady marketand a quality land bank, give us confidence that Crest is set on a path ofimproving performance, which will deliver results in line with our expectations. Stephen Stone22nd June 2006 Consolidated Income Statement Unaudited statement for the half year to 30th April 2006 Half Year Half Year Full Year 2006 2005 2005 £m £m £m Revenue 355.1 350.6 699.0 Cost of sales (283.0) (266.7) (548.2) Gross profit 72.1 83.9 150.8 Administrative expenses (24.1) (26.1) (53.3) Share of post tax profits from jointly 0.8 0.9 1.4 controlled entities Profit from operations 48.8 58.7 98.9 Finance income 0.4 0.2 0.6 Finance costs (10.0) (10.0) (20.6) Profit before taxation 39.2 48.9 78.9 Income tax expense (note 1) (11.6) (14.8) (25.0) Profit for the period 27.6 34.1 53.9 Earnings per share (note 2) Basic 24.6p 30.5p 48.2pDiluted 24.4p 30.3p 47.8p Dividends per share (note 3) Paid 8.7p 8.3p 12.5pProposed 4.5p 4.2p Consolidated Statement of Recognised Income and Expense Unaudited statement for the half year to 30th April 2006 Half Year Half Year Full Year 2006 2005 2005 £m £m £m Cash flow hedges: effective portion of changes (0.5) (2.7) (3.9) in fair value Actuarial gains/(losses) on defined benefit 6.2 (0.4) (4.8) schemes Tax on items taken directly to equity (1.8) 0.1 1.5 Net gain/(expense) recognised directly in 3.9 (3.0) (7.2) equity Profit for the period 27.6 34.1 53.9 Total recognised income for the period 31.5 31.1 46.7 Reconciliation of Movements in Consolidated Equity Unaudited statement for the half year to 30th April 2006 Half Year Half Year Full Year 2006 2005 2005 £m £m £m Profit for the period 27.6 34.1 53.9 Dividends on equity shares (note 3) (9.8) (9.3) (14.0) Net gain/(expense) recognised directly in 3.9 (3.0) (7.2) equity Shares issued 0.3 0.6 0.8 Share based payments 0.3 0.3 0.6 Net increase in equity 22.3 22.7 34.1 Opening equity 263.3 229.2 229.2 Closing equity 285.6 251.9 263.3 The preference shares were repaid on 2nd November 2005 and, in accordance withthe Companies Act 1985, a sum of £38.0m has been transferred from retainedearnings to capital redemption reserve. Consolidated Balance Sheet Unaudited statement as at 30th April 2006 April April October 2006 2005 2005 ASSETS £m £m £m Non-current assets Property, plant and equipment 9.4 2.7 2.5 Investments in joint ventures 4.6 15.1 11.5 Deferred tax assets 30.7 27.4 32.4 44.7 45.2 46.4 Current assets Inventories 694.5 760.9 742.7 Trade and other receivables 59.1 50.5 43.5 Cash and cash equivalents 48.5 7.2 57.0 802.1 818.6 843.2 Total assets 846.8 863.8 889.6 LIABILITIES Current liabilities Interest bearing loans and (44.5) (9.6) (12.9) borrowings Current tax liabilities (12.7) (11.2) (12.7) Trade and other payables (233.4) (258.4) (268.4) Provisions (1.4) (1.9) (1.7) (292.0) (281.1) (295.7) Non-current liabilities Interest bearing loans and (198.5) (232.7) (225.8) borrowings Forward currency swaps (21.3) (23.6) (19.2) Trade and other payables (18.7) (42.1) (48.8) Retirement benefit obligations (29.1) (30.8) (35.3) Provisions (1.0) (1.0) (0.9) Deferred tax liabilities (0.6) (0.6) (0.6) (269.2) (330.8) (330.6) Total liabilities (561.2) (611.9) (626.3) Net assets 285.6 251.9 263.3 SHAREHOLDERS' EQUITY Ordinary share capital 11.3 11.2 11.2 Share premium 57.9 57.4 57.7 Capital redemption reserve 38.0 - - Hedge reserve (2.4) (0.8) (2.0) Retained earnings 180.8 184.1 196.4 Total shareholders' equity 285.6 251.9 263.3 Consolidated Cash Flow Statement Unaudited statement for the half year to 30th April 2006 Half Year Half Year Full Year 2006 2005 2005 £m £m £m Cash flow from operating activities Profit for the period 27.6 34.1 53.9 Adjustments for: Interest 9.6 9.8 20.0 Tax 11.6 14.8 25.0 Share of profit of joint ventures (0.8) (0.9) (1.4) Depreciation and other non-cash items 0.4 0.8 1.6 Operating profit before working capital 48.4 58.6 99.1 changes Changes in working capital Decrease/(increase) in inventories 48.2 (33.3) (15.1) Increase in trade and other receivables (15.4) (15.7) (8.6) Decrease in trade and other payables (66.7) (23.0) (7.7) Cash from/(used in) operations 14.5 (13.4) 67.7 Interest and preference dividends paid (8.3) (7.9) (17.0) Income tax paid (11.7) (12.3) (24.1) Net cash (outflow)/inflow from operating (5.5) (33.6) 26.6 activities Cash flows from investing activities Purchases of property, plant and equipment (7.3) (0.7) (1.0) Repayment of loans to joint ventures 7.7 1.8 5.6 Interest received 0.2 0.1 0.4 Net cash from investing activities 0.6 1.2 5.0 Cash flows from financing activities Increase in bank and other loans 12.3 31.0 18.0 Repayment of preference shares (38.0) - - Share issues 0.3 0.6 0.8 Dividends paid (9.8) (9.3) (14.0) Net cash (outflow)/inflow from financing (35.2) 22.3 4.8 activities Net (decrease)/increase in cash and cash (40.1) (10.1) 36.4 equivalents Cash and cash equivalents at beginning of 44.1 7.7 7.7 period Cash and cash equivalents at end of period 4.0 (2.4) 44.1 Accounting Policies Basis of preparation EU law requires that the next annual consolidated financial statements of theCompany, for the year ending 31st October 2006, be prepared in accordance withInternational Financial Reporting Standards (IFRSs) adopted for use in the EU("adopted IFRSs"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of adopted IFRSs as at 30th April 2006that are effective (or available for early adoption) at 31st October 2006. Basedon these adopted IFRSs, the Directors have applied the accounting policies setout below, which they expect to apply in the next annual financial statements. However, the adopted IFRSs that will be effective (or available for earlyadoption) in those annual financial statements are still subject to change andto additional interpretations and therefore cannot be determined with certainty.Accordingly, the accounting policies for that annual period will be determinedfinally only when the annual financial statements are prepared. The rules for first time adoption of IFRS are set out in IFRS 1 'First TimeAdoption of International Financial Reporting Standards'. In general a companyis required to define its IFRS accounting policies and apply theseretrospectively to determine its opening balance sheet under IFRS. The standardallows a number of exceptions to this general principle to assist companies asthey make the transition to reporting under IFRS. The Company has taken the following approach in adopting IFRS for the firsttime: • The Company has taken advantage of the transitional provisions allowing the application of IFRS 2 'Share-based Payment' to grants of share options that took place after 7th November 2002. • The Company has adopted IAS 32 and 39 with effect from 1st November 2004, the date of transition to IFRS. • The Company has decided to adopt IAS 19 (Revised) early and to recognise all actuarial gains and losses in full at the date of transition and in the statement of recognised income and expense in the period they are incurred. The summarised half year financial information is unaudited and does notconstitute full accounts. The comparative figures for the financial year ended 31st October 2005 are notthe Company's statutory accounts for that financial year. Those accounts, whichwere prepared under UK Generally Accepted Accounting Practices, have beenreported on by the Company's auditors and delivered to the registrar ofcompanies. The report of the auditors was unqualified and did not containstatements under section 237(2) or (3) of the Companies Act 1985. ConsolidationThe consolidated accounts include the accounts of Crest Nicholson PLC andentities controlled by the Company (its subsidiaries) at each reporting date.Control is achieved where the Company has the power to govern the financial andoperating policies of an entity so as to obtain benefits from its activities.The profits and losses of subsidiaries acquired or sold during the year areincluded as from or up to their effective date of acquisition or disposal. On acquisition of a subsidiary, all of the subsidiary's separable, identifiableassets and liabilities existing at the date of acquisition are recorded at theirfair values reflecting their condition at that date. All changes to those assetsand liabilities, and the resulting gains and losses, that arise after the Grouphas gained control of the subsidiary are charged to the post acquisition incomestatement. Joint venturesA joint venture is an undertaking in which the Group has a participatinginterest and which is jointly controlled under a contractual arrangement. Where the joint venture involves the establishment of a separate legal entity,the Group's share of results of the joint venture is included in a single linein the consolidated profit and loss account and its share of net assets is shownin the consolidated balance sheet as an investment. Where the joint venture does not involve the establishment of a legal entity,the Group recognises its share of the jointly controlled assets and liabilitiesand income and expenditure on a line by line basis in the balance sheet andincome statement. Revenue recognitionRevenue comprises the fair value of the consideration received or receivable,net of value-added tax, rebates and discounts but excludes the sale ofproperties taken in part exchange. Revenue is recognised once the value of the transaction can be reliably measuredand the significant risks and rewards of ownership have been transferred. Revenue is recognised on house sales at legal completion. Revenue is recognisedon land sales when contracts are exchanged and all material conditions andobligations are met. Revenue on commercial property sales is recognised from the point ofunconditional exchange of contracts. Where the conditions for the recognition ofrevenue are met but the Group still has significant acts to perform, revenue isrecognised as the acts are performed. Finance costs and finance incomeInterest payable and receivable is recognised in the income statement on anaccruals basis using the effective interest method. TaxationIncome tax comprises current tax and deferred tax. Income tax is recognised inthe income statement except to the extent that it relates to items recogniseddirectly in equity, in which case it is also recognised in equity. Current tax is the expected tax payable on taxable profit for the period and anyadjustment to tax payable in respect of previous periods. The Group's liabilityfor current tax is calculated using tax rates that have been enacted orsubstantively enacted by the balance sheet date. Deferred tax is provided on temporary differences between the carrying amountsof assets and liabilities in the financial statements and the corresponding taxbases used in the computation of taxable profit. Deferred tax liabilities arerecognised for all taxable temporary differences, except those exempted by therelevant accounting standard, and deferred tax assets are recognised to theextent that it is probable that taxable profits will be available against whichdeductible temporary differences can be utilised. DividendsDividends are recorded in the Group's financial statements in the period inwhich they are declared. Property, plant and equipmentFreehold land is not depreciated. Freehold buildings are depreciated at 2% oncost less residual value. Plant, vehicles and equipment are depreciated on cost less residual value on astraight line basis at rates varying between 10% and 33% determined by theexpected life of the assets. LeasesA finance lease is a lease that transfers substantially all the risks andrewards incidental to the ownership of an asset; all other leases are operatingleases. Assets acquired under finance leases are capitalised and the outstanding futurelease obligations are shown in creditors. Operating lease rentals are charged tothe profit and loss account on a straight line basis over the period of thelease. InventoriesInventories are valued at the lower of cost and net realisable value. Landincludes land under development, undeveloped land and land option payments. Workin progress comprises direct materials, labour costs, site overheads, associatedprofessional fees and other attributable overheads. Land inventories and the associated land creditors are recognised in the balancesheet from the date of unconditional exchange of contracts. If land is purchasedon deferred settlement terms then the land and the land creditor are discountedto their fair value. The land creditor is then increased to the settlement valueover the period of financing, with the financing element being charged asinterest expense through the income statement. Cash and cash equivalentsCash and cash equivalents are cash balances in hand and in the bank. For thepurpose of the cash flow statement, bank overdrafts and loans repayable withinone year are considered part of cash and cash equivalents as they form anintegral part of the Group's cash management. Offset arrangements across Groupbusinesses are applied to arrive at the net overdraft figure. Retirement benefit costsThe Group operates a defined benefit pension scheme (closed to new employees)and also makes payments into a defined contribution scheme for employees. In respect of defined benefit schemes, the net obligation is calculated byestimating the amount of future benefit that employees have earned in return fortheir service in the current and prior periods, such benefits measured atdiscounted present value, less the fair value of the scheme assets. The discountrate used to discount the benefits accrued is the yield at the balance sheetdate on AA credit rated bonds that have maturity dates approximating to theterms of the Group's obligations. The calculation is performed by a qualifiedactuary using the projected unit method. The operating and financing costs ofsuch plans are recognised separately in the income statement; service costs arespread systematically over the lives of employees and financing costs arerecognised in the periods in which they arise. In accordance with IFRS 1, the Group has recognised the pension liability infull as at 1st November 2004. The Group has applied the requirements of IAS 19 (revised) for the year ended31st October 2005, recognising expected scheme gains and losses via the incomestatement and actuarial gains and losses via reserves. Payments to the defined contribution schemes are accounted for on an accrualsbasis. Financial Instruments Trade receivablesTrade receivables which do not carry any interest are stated at their nominalvalue less impairment losses. Trade payablesTrade creditors are generally stated at their nominal amount; finance chargesare recognised where material (see inventories). BorrowingsInterest bearing bank loans and overdrafts are measured initially at fair value,net of direct issue costs. Finance charges are accounted for on an accrualsbasis in the income statement using the effective interest method and are addedto the carrying amount of the instrument to the extent that they are not settledin the period in which they arise. Borrowings in foreign currencies are retranslated at the period end exchangerate with differences recorded in the income statement. This is offset by thechange in fair value of derivative financial instruments which are fair valuehedges (see below). Derivative financial instruments and hedge accountingThe Group uses currency swaps to manage financial risk. Those instruments thatmeet the hedge accounting criteria are treated as hedges. The Group does not usederivative financial instruments for speculative purposes. Derivative financial instruments are recognised at fair value. The fair value ofswaps is the estimated amount that the Group would receive or pay to terminatethe swap at the balance sheet date, taking into account exchange rates and thecurrent creditworthiness of the swap counterparties. Where the derivative instrument is deemed an effective hedge over the exposurebeing hedged, the derivative instrument is treated as a hedge and hedgeaccounting applied. Under a fair value hedge the change in the fair value of thederivative is recognised in the income statement and offsets the movement infair value of the hedged item. Under a cash flow hedge, gains and losses on theeffective portion of the change in the fair value of the derivative instrumentare recognised directly in equity. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting and any ineffectiveness in the hedge relationshipare recognised in the income statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated or exercised, or no longer qualifies for hedge accounting. At thattime, any cumulative gain or loss on the hedging instrument recognised inreserves is retained in reserves until the forecasted transaction occurs. If ahedged transaction is no longer expected to occur, the net cumulative gain orloss recognised in reserves is transferred to net profit or loss for the period. Share-based paymentsCharges for employee services received in exchange for share-based payments havebeen made for all schemes granted after 7th November 2002. The fair value of such options has been calculated using a binomialoption-pricing model, based upon publicly available market data at the point ofgrant. The fair value is expensed on a straight line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest with acorresponding credit to equity. Own shares held by ESOP TrustTransactions of the Group sponsored ESOP Trust are included in the Groupconsolidation. In particular, the Trust's purchases of shares in the Company aredebited to equity through retained earnings. ProvisionsA provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to theliability. Notes 1 Taxation Half Year Half Year Full Year 2006 2005 2005 £m £m £m Current taxation 11.6 14.8 25.0 Deferred taxation - - - 11.6 14.8 25.0 2 Earnings per share Basic earnings per share are calculated on the profit attributable to ordinaryshareholders of £27.6m (2005: £34.1m) on a weighted average of 112.4m (2005:111.7m) ordinary shares in issue during the six months. Diluted earnings per share are calculated on the profit attributable to ordinaryshareholders of £27.6m (2005: £34.1m) on a weighted average of 113.2m (2005:112.6m) ordinary shares on the basis that 2.4m (2005: 2.3m) share options hadbeen exercised. 3 Dividends Half Year Half Year Full Year 2006 2005 2005 Dividends paid Cost £9.8m £9.3m £14.0m Dividends per share 8.7p 8.3p 12.5p Dividend proposed Cost £5.0m £4.7m Dividends per share 4.5p 4.2p The proposed interim dividend was approved by the Board on 22nd June 2006 andwill be paid on 1st September 2006 to shareholders on the register at the closeof business on 4th August 2006. No charge has yet been made for this dividend inaccordance with IAS10 - Events after the balance sheet date. 4 Analysis of net debt Half Year Half Year Full Year 2006 2005 2005 £m £m £mCurrent assets Cash and cash equivalents 48.5 7.2 57.0 Current liabilities Bank overdrafts and loans (23.8) (9.6) (12.9) Loan notes (20.7) - - 4.0 (2.4) 44.1 Non-current liabilities Preference shares - (38.0) (38.0) Bank loans (117.0) (97.0) (84.0) US Dollar Loan notes at original cost (99.4) (120.1) (120.1) Exchange rate difference on US Dollar 17.9 22.4 16.3 Loan notes (198.5) (232.7) (225.8) (194.5) (235.1) (181.7) 5 Transition to IFRS The disclosures concerning the transition from UK GAAP to IFRS, including thereconciliations of equity at 1st November 2004 (the date of transition to IFRS),at 31st October 2005 (the date of the last UK GAAP accounts) and at 30th April2005 and the reconciliations of profit for the full year and half year 2005,were published on the Group's website www.crestnicholson.com on 21st February2006. Some minor amendments to those reconciliations have been made which arereflected in the reconciliations set out below and the full reconciliationspublished on the Group's website have been updated accordingly. The effect ofthese amendments has been to reduce equity at 31st October 2005 by £2.8m butthere has been no impact on profit before tax for the year to that date. Reconciliation of prior period Income Statements Half Year Full Year 2005 2005 £m £mRevenue Group turnover per UK GAAP 310.7 701.7 Change to legal completion on housing 45.7 27.0 Other changes to revenue recognition (5.8) (29.7) Group revenue per IFRS 350.6 699.0 Profit from operations Operating profit including joint ventures per UK 43.7 94.9 GAAP Change to legal completion on housing 15.1 11.2 Other changes to revenue recognition (0.4) (7.6) Reduced charge for pension costs 0.1 0.3 Increased charge for share based payments - (0.5) Increased margin from discounted inventory 0.4 1.1 Reallocate joint venture interest and taxation (0.2) (0.5) Profit from operations per IFRS 58.7 98.9 Net finance costs Net interest payable per UK GAAP (7.8) (15.7) Reallocate dividend on preference shares (1.0) (2.1) Increased charge for pension costs - (0.2) Interest charge on deferred payments (1.0) (2.0) Net finance costs per IFRS (9.8) (20.0) Taxation Tax charge per UK GAAP (10.9) (24.5) Change to legal completion on housing (4.5) (3.4) Other changes to revenue recognition 0.2 1.7 Reallocate joint venture taxation 0.2 0.5 Deferred tax on discounting of land creditors 0.2 0.8 Deferred tax on share based payments - (0.1) Tax charge per IFRS (14.8) (25.0) Reconciliation of prior period equity Half Year Full Year 2005 2005 £m £m Shareholders' funds per UK GAAP 348.6 367.4 Reclassification of preference shares as debt (38.0) (38.0) Recognition of pension scheme deficit and (23.0) (26.1) prepayment write off Change to legal completion on housing (20.2) (23.0) Other changes to revenue recognition (15.9) (21.1) Eliminate accrued dividend 4.7 9.8 Discounting of long term creditors (3.5) (3.7) Hedge reserve arising on currency swap (0.8) (2.0) Shareholders' equity per IFRS 251.9 263.3 6 Interim Statement The Interim Statement for the half year will be sent to all shareholders andcopies will also be available from Crest House, 39 Thames Street, Weybridge,Surrey KT13 8JL, the Company's Registered Office. 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Crest Nicholson